The Supreme Court of India, comprising Justice Surya Kant, Justice Joymalya Bagchi and Justice V. Mohana (who authored the judgment), delivered its judgment on 26 October 2026 in Atibir Industries Co. Ltd. v. State Bank of India & Anr., reported as 2026 INSC 1156. The case involved questions concerning the classification of loan accounts as Non-Performing Assets (NPA) during the COVID-19 moratorium period, the validity of debt assignment to an Asset Reconstruction Company (ARC) under Section 5 of the SARFAESI Act, 2002, and the Supreme Court's equitable jurisdiction to facilitate a full and final settlement while preserving an operational industrial undertaking. The appellant, Atibir Industries Co. Ltd., a manufacturer of sponge iron and pig iron, had availed credit facilities from a consortium of banks led by the State Bank of India (SBI). Following financial difficulties during the COVID-19 pandemic, SBI classified the appellant's loan account as an NPA on 31 March 2021, with retrospective effect from 16 October 2020. SBI initiated recovery proceedings before the Debt Recovery Tribunal (DRT), filed proceedings under Section 7 of the IBC before the NCLT, and issued notices under Section 13(2) of the SARFAESI Act. Despite ongoing One-Time Settlement (OTS) negotiations and the appellant having deposited approximately ?25 crore, SBI proceeded with the assignment of the stressed loan exposure. On 24 March 2023, SBI assigned the debt, valued at ?453.83 crore, to CFM Asset Reconstruction Pvt. Ltd. for a consideration of ?250 crore. The appellant challenged the NPA classification and assignment before the Calcutta High Court. While the Single Judge set aside both actions as premature in view of the RBI's pandemic-related moratorium circulars, the Division Bench reversed that decision, holding that default in cash-credit facilities permitted borrower-wise NPA classification across all facilities and upholding the assignment under Section 5 of the SARFAESI Act. The matter consequently reached the Supreme Court.

ISSUES OF LAW

(I) Whether the classification of a borrower’s credit facilities as a Non-Performing Asset (“NPA”) during the COVID-19 pandemic moratorium period was premature and contrary to RBI guidelines. (II) Whether a bank can assign a stressed loan exposure to an Asset Reconstruction Company (“ARC”) under Section 5 of the SARFAESI Act while simultaneously pursuing recovery proceedings under Section 19 of the Recovery of Debts and Bankruptcy Act, 1993 and Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”). (III) Whether the Supreme Court, exercising its equitable jurisdiction to preserve an operational going concern, can determine a full and final settlement amount covering the debt assigned to an ARC.

FACTUAL MATRIX

Atibir Industries Co. Ltd. (“the appellant”), a manufacturer of sponge iron and pig iron, availed various credit facilities from a consortium of banks led by the State Bank of India (“SBI / Respondent No. 1”). Following financial stress during the COVID-19 pandemic, SBI classified the appellant’s loan account as an NPA on March 31, 2021, with retrospective effect from October 16, 2020. SBI initiated recovery proceedings before the DRT-I Kolkata, filed a Section 7 IBC petition before the NCLT Kolkata, and issued notices under Section 13(2) of the SARFAESI Act. While One-Time Settlement (“OTS”) negotiations were ongoing and the appellant had deposited nearly ?25 crore, SBI issued an e-auction web notice on February 10, 2023, placing the stressed loan exposure for assignment. On March 24, 2023, SBI assigned the debt (valued at ?453.83 crore) to CFM Asset Reconstruction Pvt. Ltd. (“Respondent No. 2”) for a consideration of ?250 crore.  The appellant challenged the NPA classification and the assignment in the Calcutta High Court. A Single Judge set aside the NPA declaration and the debt assignment as premature under RBI’s pandemic moratorium circulars. However, a Division Bench reversed the Single Judge’s decision, holding that default in cash credit facilities permitted borrower-wise NPA classification across all facilities and validated the Section 5 SARFAESI assignment. The appellant appealed to the Supreme Court.

JUDGMENT

The Supreme Court disposed of the appeals by exercising its equitable powers to effect a full and final settlement, balancing the commercial rights of the ARC with the preservation of an operating industrial unit and its workforce. During the Supreme Court proceedings, the appellant deposited the base acquisition value of ?250 crore with Respondent No. 2 pursuant to court orders. To adjudicate the additional liability over and above ?250 crore, the Supreme Court appointed former Supreme Court Judge Justice Anil R. Dave. Justice Dave submitted a report recommending a reasonable return on investment on the ?250 crore acquisition cost in the range of 13% to 15% per annum plus litigation costs. Taking into account Justice Dave’s report, the time elapsed, the funding source of the assignment, and the need to do complete justice under equity: The Supreme Court directed the appellant to pay an additional consolidated sum of ?125 crore over and above the ?250 crore already paid to Respondent No. 2 within 12 weeks as a full and final settlement of all assigned debt dues. Upon receipt of the ?125 crore, the respondents were directed to return all title deeds and release all securities and guarantees within four weeks. The pending recovery proceedings before the NCLT Kolkata (“Section 7 IBC”) and DRT-1 Kolkata were ordered to stand disposed of. The Court clarified that if the appellant fails to strictly adhere to the 12-week timeline to pay the ?125 crore, the respondents will be at liberty to revive all original legal proceedings against the appellant.

LINK TO ACCESS THE JUDGMENT HERE

CASE NAME

Atibir Industries Co. Ltd. v. State Bank of India & Anr.

COURT NAME

Supreme Court of India

JUDGES NAME

Surya Kant, J., Joymalya Bagchi, J., and V. Mohana, J. (Judgment authored by V. Mohana, J.)

DATE OF JUDGMENT

October 26, 2026

CITATION / NEUTRAL CITATION

2026 INSC 1156 | Civil Appeal Nos. [—] of 2026 (Arising out of SLP (C) Nos. 21029-30 of 2024)